Townhouse renovation costs are falling — except in the luxury market

The exorbitant cost of townhouse renovation work is finally coming back down to Earth — for some homeowners, at least.

Rising material costs and feverish competition for contracting work have made it difficult for townhouse owners to complete renovations since the onset of the pandemic, but architects and builders say a recent slowdown in sales activity has eased demand, lowering the cost burden on homeowners.

The stakes were particularly high for sellers, as homes with recently completed work sell for a premium. But with townhouse sales falling, contractors have become more available and the price of materials has started to normalize.

“We’re finding material prices are coming down a little bit,” said Rob Kaliner, owner of RoundSquare Builders. “A lot of it has to do with how hard you’re willing to look for the different materials.”

The price of lumber has fallen by about two-thirds after peaking at more than $1,200 per 1,000 board feet in March, according to the National Association of Home Builders. Bill Caleo, co-founder of the Brooklyn Home Company, said his contractors have reported an abrupt decline in prices.

“This all happened in the last two weeks,” Caleo said, noting that the price of some plywood products has fallen by 50 percent, roughly back to where it was before the pandemic.

“People perceive there’s labor and material shortages because that was the shock during the pandemic,” said Douglas Elliman broker Neil Porter. “Now we’re back to being able to source materials.”

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Alan Barlis, a principal at architectural firm BarlisWedlick, said subcontractors who told him to get lost over the summer are now looking for business again.

“People who were saying ‘I’m busy for six years, don’t call me again,’ are calling us about jobs,” Barlis said. “It makes it very hard to talk about trends because it really becomes about fishing around for the right person.”

The ultra luxury market has not seen a similar cooldown. Architect Joseph Vance said scarcity is still prevalent for properties asking $20 million and above.

“It’s absolutely the other way,” Vance said. “It’s insane and getting more insane.”

At the highest end of the market, architects only trust about a dozen contractors to accomplish renovation work, he said, because jobs on ultra-luxury townhouses are more complex and require a greater degree of expertise.

“They’re too busy, they’re not looking for new work, so when new work comes along they tend to charge a bit more,” Vance said.

Those who can secure a contractor still face other challenges. Persistent appliance shortages driven by supply-chain disruptions mean nobody can get a new high-end refrigerator, architects say, especially not a Sub-Zero (among the most popular brands in high-end listings, according to a TRD analysis).

“There’s no ETA,” Barlis said.